The UK managed to narrowly avoid a recession at the end of last year, but that is unlikely to be the case in 2023, with both the Office for Budget Responsibility and the Bank of England forecasting a return to recession this year. ONS GDP data shows that GDP in Q4 2022 was flat, after a contraction in Q3, with weak trade offset by rising consumption and investment. As a result, the UK has recorded the fastest growth of any G7 economy in 2022 (4 per cent), while still being the only G7 economy not to have returned to its pre-pandemic size (down 0.8 per cent since Q4 2019). Federation of Small Businesses (FSB) policy chair Tina McKenzie said: “While it is positive that the UK has technically avoided a recession in the second half of last year, the news will come as cold comfort to many thousands of small businesses. “In particular, the 0.5% fall in GDP in December is a red flag showing the economy stalled at the end of 2022, just when small firms were hoping for a traditional festive boost. “Looking ahead, the IMF and the Bank of England both predict a contraction in the size of the UK’s economy this year, leaving small firms facing a long period without growth. Just next month, many small firms who fixed their energy bills last summer as prices rocketed are worried that they will see three- or four-fold increases when the Government’s Energy Bill Relief Scheme shuts down, making a number of them unviable. “Our headline Small Business Index confidence tracker fell deeper into negative territory in the last quarter of 2022, at -46 points – far lower than it was during the Omicron lockdown, and only just an improvement from the depth plumbed during the second national lockdown in the final quarter of 2020. “That’s why we’re greeting today’s news with a strong dose of caution. “Inflation is still a concern, and its effects will linger in the economy even once it falls back into a range we are more used to seeing. Interest rates remain high in the fight to curb inflation, with small businesses caught between elevated prices and greater debt costs. “On the plus side, financial markets are performing well, and the reopening of China’s economy will help improve general global economic conditions. “We want small firms to be in a position to take advantage of any improving economic conditions – and to create a groundswell of growth which will boost the overall economy. Setting them up for growth must be a key focus of the newly-created business and trade department, and we are looking to the Budget in mid-March to set out a positive agenda for small businesses and the self-employed. “Late payment must be tackled, to get small suppliers the funds they are due in a timely fashion. The day-one taxes – like business rates – that take a chunk out of budgets before small firms make a penny in turnover should be examined, while the VAT threshold should be increased to encourage revenue growth. “The cuts to R&D tax credits should be reversed, given the huge contribution to overall R&D made by small firms, and the Government’s own newly-reaffirmed focus on science and technology. More people should be helped to reskill and upskill, while bringing in Help to Green vouchers would allow small firms to cut their emissions and their energy bills, while boosting the economy. “We know what will help, and now need the Government to work with us and turn an economy with GDP in the doldrums into one galvanised by a dynamic and growing small business community.” Ben Jones, lead economist, CBI, said: “We may have avoided a technical recession late last year, but we probably won’t avoid one this year. While we expect that the downturn will be shallow, if we act now, we can make the recession even shorter than predicted. “All eyes are on the Chancellor’s March budget, when businesses will be looking for a bolder approach to tackling labour and skills shortages and falling business investment. In particular, firms will be looking for a permanent replacement to the super-deduction, as well as a focus on innovation and the green economy, to help boost economic growth in the years ahead.” James Smith, research director at the Resolution Foundation, said: “The UK avoided a rapid return to recession last year by the narrowest of margins. But it is not out of the woods yet, and families are still living through a living standards downturn. “The longer-term picture is more worrying, with the UK economy yet to return to its pre-pandemic size having suffered a prolonged period of weak growth since the financial crisis. “However, falling wholesale gas prices offer hope for households and the wider economy – with inflation on track to fall sharply later this year.”

Banks are quickly falling out of favour with Yorkshire SMEs according to new research, which found that nearly half (47%) of firms in the region are less likely to borrow from a traditional bank than they would have been previously. The survey commissioned by Growth Lending, identified a number of reasons for this eroded confidence, with 44% saying their trust has waned because of events such as the 2008 banking crisis and banks’ treatment of businesses during the pandemic. A third (33%) of Yorkshire SMEs said they would be unlikely to reach out to a bank because they had been turned down by a traditional lender in the past, while 22% said that borrowing terms from traditional banks are unsustainable for their business. Meanwhile, 33% said they are less likely to consider traditional banks following a positive experience of borrowing from an alternative lender. Many SMEs in the region are turning towards alternative sources of external funding, with nearly a third (32%) seeking private investment to grow, ahead of the 26% looking to secure bank loans during the coming year. Plus, 21% of Yorkshire businesses are planning to grow through invoice finance. Yet, despite 43% describing their current need for external investment as “significant,” the ‘Don’t Bank On It’ report also found a widespread lack of awareness of alternative funding streams amongst Yorkshire SMEs. 11% were unaware of any form of alternative lending and 32% said they were unsure which alternative funding options were available to their business. 21% of SMEs in the region believe there is a lack of education available around alternatives to traditional lending. Considering that 45% of Yorkshire SMEs have at least £100,000 tied up in late payments on average and almost half (47%) of respondents are unaware of invoice finance as a form of funding, this lack of awareness could be costing them millions in working capital. Commenting on the findings, Lauren Couch, Managing Director at Growth Lending, said: “Traditional lenders have tightened their lending criteria and are becoming increasingly selective, favouring existing clients and established businesses. It is arguable that these lenders have withdrawn from all but the safest markets in the current climate and with sky-high interest rates and borrowing rates set to dramatically increase, they are becoming a less attractive or unattainable source of funding for many businesses. “While it is positive to see that more SMEs in the Yorkshire region are considering non-traditional lending streams to protect and grow their businesses, the lack of education around these options is holding many back from getting the support they need. As economic uncertainty continues, this is a key challenge that lenders must overcome to help the SME business community survive and even thrive, during difficult times.”

A new grant scheme will enable North Lincolnshire businesses to supercharge digital growth and become more sustainable – fuelling the local economy and safeguarding jobs. The cash is from the first round of the Government’s UK Shared Prosperity Fund, with grants of up to £5,000 available for companies to invest in new technologies or cut their carbon footprint. The grants were announced by North Lincolnshire Council leader Rob Waltham at a business breakfast held at the Baths Hall, Scunthorpe. He said: “This Government cash will enable many businesses leaders across North Lincolnshire to future-proof their companies by investing in the technology they need to create and secure jobs. “Digitalisation is critical – adapting to and harnessing new technologies enables businesses to grow and expand at pace. And, or course, we are all working towards a greener, cleaner future so we’ve created another cash pot that businesses can tap into to make the transition that little bit easier. “Simple things for some small businesses can make a big difference, just replacing light bulbs with LEDs or buying the newest appliances can slash energy bills and reduce carbon emissions.” The Sustainability Business Grant can be used to invest in energy production infrastructure such as solar panels or biomass boilers and building improvements including insulation and heat pumps. It can also be used to buy energy efficient products including LED lighting and low energy equipment such as fridges and dishwashers. The Digital and Marketing Grant is aimed at companies looking to invest in new technology. This can be everything from cutting-edge hardware and software, upgrading internet connections, buying e-commerce equipment, and paying for marketing campaigns or consultancy costs. Businesses of all sizes are eligible to apply for the grants, with the minimum award being £500. This latest grant programme is part of the council’s pledge to deliver on the levelling up agenda while focusing on the A Green Future strategy – enabling the local economy to grow, protect and create new jobs while building a greener, more sustainable North Lincolnshire. The UK Shared Prosperity Fund is part of the Government’s Levelling Up agenda and aims to provide £2.6 billion of funding for local investment across the UK by March 2025. The fund aims to boost productivity and tackle inequality.